IFSL RC Brown UK Primary Opportunities | Fund Update | November 2022
November: FTSE 100 records best month since November 2020
Last month we asked, ‘Is this market for turning?’ as we felt the point of maximum pessimism (the bungled Kwarteng mini budget and Truss’s brief Premiership) had passed. November proved a constructive month for equity markets. Interest rates were raised in both the UK and US by 75bps, though comments that rates may be starting to flatten, gave ammunition to the bulls. Inflation remains at 40 year highs in the UK though this is expected to start falling as higher interest rates and a weak economy take effect. Unemployment – still at very low historical levels – saw a modest uptick.
Despite the difficult outlook – inflation at 10%, rising interest rates, a cost of living crisis and likely recession, and the Ukraine-Russia war that may escalate further – it is important to remember markets are forward looking and the first signs of greater certainty and economic recovery, will see equities rally. This month’s rally, on top of October’s bounce does provide hope that the worst of the market falls may be behind us. Balance sheets are generally strong and dividends attractive. The forecast dividend yield of the FTSE All Share now stands at 3.5% and offers a growing dividend income stream.
It has been a quieter year than we anticipated at the start of the year for primary opportunities. Given we are now entering holiday season, we expect December to be subdued but with the recent return in market confidence, expect a considerably busier 2023 which we anticipate being beneficial to performance.
This month we added BT to the portfolio.
In November the IFSL RC Brown UK Primary Opportunities fund returned 5.7% compared with 7.1% for the FTSE All Share and 7.6% for the IA UK All Companies sector.
Purchases
BT
BT is the incumbent telecoms operator in the UK, owner of Openreach – the largest fixed line network in the UK and owner of mobile operator EE. The shares have been weak this year as a result of cost pressures and fell further following a trading update. We view the fall as overdone and took the opportunity to add the company to the portfolio given its lowly valuation and dividend yield of 6%, which pays us to wait ahead of a recovery.
Sales
Large holdings in Astrazeneca, Shell and BHP were trimmed on strength. Underperformer Likewise was sold.
Cumulative Performance (Total Return %) – November 2022
| Fund/Benchmark Name | 3M to 30/11/2022 | 6M to 30/11/2022 | Year to 30/11/2022 | 3 Years to 30/11/2022 | 5 years to 30/11/2022 | Since Inception (28/05/1997) |
| IFSL RC Brown UK Primary Opportunities P Acc | 0.1 | -7.1 | -12.2 | 3.2 | 12.5 | 434.22 |
| Quartile Ranking IA UK All Companies | 4 | 4 | 4 | 3 | 3 | 2 |
| IA UK All Companies | 3.1 | -2.2 | -3.9 | 5.2 | 13.2 | 295.6 |
| FTSE All Share | 4.0 | 0.3 | 6.5 | 12.2 | 22.8 | 334.0 |
Source: FE: 30/11/2022
Cont.
Discrete Annual Performance (Total Return %) – November 2022
| Fund/Benchmark Name | Year to 30/11/2022 | Year to 30/11/2021 | Year to 30/11/2020 | Year to 30/11/2019 | Year to 30/11/2018 |
| IFSL RC Brown UK Primary Opportunities P Acc | -12.2 | 22.7 | -4.3 | 9.4 | -0.4 |
| Quartile Ranking IA UK All Companies | 4 | 1 | 2 | 4 | 1 |
| IA UK All Companies | -3.9 | 17.3 | -6.6 | 12.3 | -4.2 |
| FTSE All Share | 6.5 | 17.4 | -10.3 | 11.0 | -1.5 |
Source: FE: 30/11/2022
Please be advised that the past is not necessarily a guide to future performance. Investments and the income derived from them can fall as well as rise and the investor may not get back the amount originally invested.
